Brasov Urban Transport Project

Location:

Romania

Project number:

47460

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

22 Jul 2015

Status:

Cancelled

PSD disclosed:

28 May 2015

Translated version of this PSD: Romanian

Project Description

The objectives of the project were to finance the purchase of up to 130 new buses for the Regia Autonoma de Transport Brasov (the Company) and to finance a street upgrading programme with the City of Brasov (the City).
 
The EBRD also extended a financing to the City of Brasov to complement an existing loan signed in 2005. The operation will enable the City to continue a comprehensive street rehabilitation programme, along key public transport corridors in the City centre, financed by the original loan.
 
The Bank is now considering an extension of up to RON 105 million to continue the renewal of the Company’s fleet of buses and trolleybuses. Through this extension the objectives are to further enhance the quality of urban transport and mobility of the citizens of Brasov, through acquisition of 85 new EURO-6 buses and 10 trolleybuses, which is expected to create considerable social, environmental and financial benefits to the community.
 
In addition to the extended investment, the Bank will facilitate a twinning arrangement with a bus operator from the EU that will support the Company with the commercialisation of its operations, based on a sound business plan. Also, an EU compliant performance-based public service contract (“PSC”) will be introduced and this contracting modality would be replicated by the City when tendering certain routes to private sector operators.
 

Transition Impact
 

  • Demonstration effect
The team explored with the City and the Company, the possibility to structure the loan without a full financial guarantee from the City, which was then the Bank’s first such municipal loan in Romania. As such the Operation was the first transaction where the Bank lent directly to a municipal transport company in Romania.
 
  • Support to the corporatisation of the Company and organisational improvements
Transition impact was delivered through restructuring of the public transport network; restructuring of the Company to adapt to the new service model and reduction of transport modes, and increased productivity and possible out-sourcing of services to realise efficiencies.
 
  • Client-Supplier Relationship through the Public Service Contract (the PSC)
The Operation supported the development of one of the first Romanian comprehensive PSCs for a public transport company. The PSC defined the scope of services provided by the Company and set the level for service payments by the City for the services it purchases. The service payment replaced the system of direct, untargeted subsidies, and provided incentives for the Company to improve its financial and operational performance.
 
  • Development of Regulatory Framework and Institutional improvements
The consultants for the technical and environmental due diligence reviewed the regulatory and institutional framework for public transport in the City and provided recommendations how to structure and develop the central public transport unit (authority) in the City.
 
Transition goals of the extension will include the following:
 
  • Improved framework for markets:
Through introducing a PSC with performance standards and payment conditions in full compliance with EU Regulation 1370/2007, the Project will create a sound and transparent relationship between the Company and the City of Brasov, which will enable a solid framework for service delivery and regulation of a key public service.
 
Moreover, the Project aims to promote transport integration measures across the Brasov metropolitan area. This will be achieved via the use of TC Funds, to be provided to the Intercommunity Development Association for Transport (ADI-T), to strengthen its institutional, legal and regulatory structure.
 
  • Successful demonstration of new structures and ways of financing:
The fleet renewal will be performed in accordance with EU environmental exhaust emission standard EURO 6, as per Regulation (EC) 595/2009, and will include options for reduced emissions such as diesel hybrid and electric, notably for routes through the historic centre of Brasov.
 
The twinning agreement with a high quality operator will serve as a means of introducing additional commercial discipline and corporate systems, as well as providing support for the implementation of the restructuring plan.
 
Lastly, through TC Funding, the Project will assess the possibility to develop a bus leasing model for operators in Brasov county, considering legal, regulatory, institutional, operational and financial requirements and with sufficient consultative assessment of market structure and capacity of bus operators.
 
 

The Client

Regia Autonoma de Transport Brasov (the Company)
The City of Brasov (the City)
 

EBRD Finance

 
The initial project comprised the following facilities:
 
  • Up to EUR 15 million senior loan to the Company
  • Up to EUR 15 million loan to the City
  • Up to EUR 7.5 million additional finance to the City
The extension will consist of a senior loan of up to RON 105 million (EUR 24 million) to the Company.
 

Project Cost

 
The total cost of the initial project has been estimated to EUR 45 million.
 
The extension will add RON 128 million to the cost of the Project (EUR 28 million).
 

Environmental and social categorisation, impact, and mitigation

Categorised B in accordance with 2014 Environmental and Social Policy. The modernisation of the bus and trolleybus fleet is expected to improve the reliability and quality of public transport services for the local population, improve overall safety and accessibility, contribute to improving air quality and increase fuel efficiency through the new vehicle fleet meeting EURO VI environmental standards resulting in lower carbon and other air emissions.

RAT Brasov is an existing client of the Bank, and its performance and annual reporting under the earlier project has been satisfactory. The Company is currently implementing an Integrated Environmental, Quality and Health and Safety Management System and has elaborated a series of procedures and policies in order to manage the environmental and social aspects related to its operations. The Company is now preparing to attain certification according to ISO 9001, ISO 14001 and OHSAS 18001 standards.

An independent consultant was engaged with TC funds to carry out environmental and social due diligence (ESDD) for the project,  including an E&S analysis of the proposed procurement of new buses and trolleybuses, a review of the corporate E&S policies and procedures of RAT Brasov and a site visit to the Company’s facilities. The ESDD confirmed that the company does not have a formal environmental management system although there is a clear indication that the company is committed to complying with environmental legislation and ensuring that the procedures that are in place are adhered to. Some additional improvements in waste management will be required. Human resources policies and procedures are sufficiently developed and in compliance with PR2, although a systematic approach for grievance mechanism for the Company’s workers will need to be set up. The ESDD also identified that the Company’s health and safety arrangements require some further improvements and that the implementation of an OHSAS 18001 certified management system will be a useful instrument to better manage road traffic safety, training of drivers and overall occupational health and safety. The low-floor buses and trolleybuses will improve overall public transport accessibility for the disabled and other people of reduced mobility. The Company is constantly working on increasing its transparency and seeking to improve its performance and stakeholder engagement and a Stakeholder Engagement Plan has been prepared to guide them to good practice.

The Environmental and Social Action Plan (ESAP) agreed for the previous loan has been amended and updated to address the issues identified in the ESDD including the above measures to strengthen the Company’s existing environmental, health, safety and road traffic management systems.

Technical Cooperation

 
Pre-signing
 
Technical and Environmental due diligence (€60,000), financed under an existing framework contract with DHV, i.e. Framework for Municipal and Environmental Consultancy Services (Phare Region).
 
Post-signing
 
Project management and institutional building in preparation for EU accession (€300,000).
 
The Extension will mobilize further TC Components:
 
Pre-Signing
 
  • Due diligence and procurement support (up to EUR 60,000) to include (i) a technical review of existing studies, including financial and economic appraisal of the investments and a Greenhouse Gas (GHG) assessment of the Project (ii) an environmental and social assessment of the Project, and (iii) support in conducting the procurement process for acquiring the proposed vehicles.
Post-Signing
 
  • Twinning partnership support for corporate development and commercialisation. (Estimated at EUR 150,000). The TC would cover support for preparation of business development plan, twinning with a private sector operator as a means of introducing additional commercial discipline and a corporatised system towards operations.
     
  • Preparation of Public Service Contract and assessment of leasing structures (Estimated at EUR 75,000,). The objective is to (i) amend the existing PSC for RAT Brasov and bring it in full compliance with EU Regulation 1370/2007 and (ii) prepare an additional PSC contract for operators in Brasov County along the same principles and considering bus leasing options and duration of PSC related capital costs borne by the operators.
     
  • Support ADI-T to reinforce its function as a coordinating body (Estimated at EUR 100,000). The TC shall focus on promoting institutional, legal and regulatory structures and developing technological solutions and implementation methods for integration of both bus routes and services and fare structures and ticketing.

Company Contact

 
Cristinel Florea, Economic Director, Cristinel.florea@ratbv.ro
 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.